Different functional and structural strategies to cope with water shortage exist both within and across plant communities. The current trend towards increasing drought in many regions could drive some species to their physiological limits of drought tolerance, potentially leading to mortality episodes and vegetation shifts. In this paper, we study the drought responses of Quercus ilex and Pinus sylvestris in a montane Mediterranean forest where the former species is replacing the latter in association with recent episodes of drought-induced mortality. Our aim was to compare the physiological responses to variations in soil water content (SWC) and vapor pressure deficit (VPD) of the two species when living together in a mixed stand or separately in pure stands, where the canopies of both species are completely exposed to high radiation and VPD. P. sylvestris showed typical isohydric behavior, with greater losses of stomatal conductance with declining SWC and greater reductions of stored non-structural carbohydrates during drought, consistent with carbon starvation being an important factor in the mortality of this species. On the other hand, Q. ilex trees showed a more anisohydric behavior, experiencing more negative water potentials and higher levels of xylem embolism under extreme drought, presumably putting them at higher risk of hydraulic failure. In addition, our results show relatively small changes in the physiological responses of Q. ilex in mixed vs. pure stands, suggesting that the current replacement of P. sylvestris by Q. ilex will continue.